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Warning over 'early pension release' scams

Published on 15 February 2013 11:30 AM

A campaign by regulators has warned of rogue firms trying to entice cash-strapped pension savers into freeing up their retirement pot early.

 


Going down such avenues is a risky business, with campaigners worried that people are not always being made aware of the tax charges and fees involved.

If a person accesses their pension before the age of 55 it can result in an 'unauthorised payment' - something which attracts significant penalties that could wipe out most of their pension pot, leaving them with little cash for their retirement.

The tough economic climate appears to be tempting people into liberating their pensions early, claims the Pensions Regulator, which is one of the agencies involved in the campaign.

It estimates that around £400 million has been transferred from funds in this way and is urging people to think of the consequences before jumping into anything.

The campaign, which is also being backed by the City watchdog and the tax authorities, warns that rogue firms often work alongside 'introducers' who bombard consumers with spam texts, make cold calls and put up website promotions to encourage them to release some of their cash.

'Highly dubious' unregulated investments are often used to transfer the money, many of which are based abroad.

Warning to pension savers

Sharon Campbell, the Financial Services Authority's head of financial crime, is urging people to be very wary of pension release schemes.

She said they regularly carry punitive rates of commission that are hidden, with promised investments turning out to be scams in many cases.

Campaigners are calling for people to display caution if they are approached out of the blue by text or cold called.

They should also keep an eye out for companies offering a 'loan', a 'savings advance' or 'cashback' from a pension, as well as anything to do with 'loopholes' or overseas investments.

More details about the consequences of such offers are to be placed on the Pensions Advisory Service's website, while pension administrators who receive a transfer request and suspect that money is being liberated can get in touch with Action Fraud.

Copyright Press Association 2013

Last updated: Oct 06 2017

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